Japan Real Wages Grow for Sixth Month as Takaichi Cuts Food Tax

Japan's real wages grew 1.6% in June from a year earlier, marking the longest streak of consecutive monthly increases since 2021. Nominal wages rose 3.4% to approximately 531,677 yen per month, driven by a 3.4% increase in base salaries and a 3.5% rise in special payments. This momentum is supported by solid corporate earnings and a tight labor market.

Sanae Takaichi, the Prime Minister of Japan, announced plans to reduce the sales tax on food and non-alcoholic beverages from 8% to 1% for two years starting in April. Her government will also provide cash handouts to low-income households to offset the impact of high food prices. The government projects nominal wages will continue to rise by 3.1% annually through fiscal 2027.

The steady wage growth strengthens the case for the Bank of Japan to implement further interest rate hikes, potentially as early as September. Governor Kazuo Ueda has warned that upside risks to prices have intensified, suggesting a shift in monetary policy to manage inflation.